The High Line park comes to an abrupt end on the west side of Manhattan, as a chain link fence keeps anyone from stumbling into a massive train yard that handles much of the island’s commuter rail traffic.
Within a few years, that fence be will gone and an entire city block will have been built atop the 26-acre rail yard. Literally on top – the trains will continue to run on the same tracks they are on today, but a $1.5-billion platform will keep them out of sight.
Five thousand apartments will sprout from the newly-built artificial land mass, along with a million square feet of retail space and six million square feet of office space – the same amount that can be found in all of Saskatchewan. That’s three office towers, nine residential buildings and dozens of stores. There are also plans for a school, a cultural centre and 12 acres of open park space.
The $15-billion project is ambitious even by New York standards, and will result in an entirely new neighbourhood on what had been considered a fully built-out island. But in the meantime, much of the site is surrounded by wooden hoarding bearing the name of Canada’s largest real estate developer – Oxford Properties.
The project is the company’s bold step into the United States. And for the hundreds of thousands of pensioners and workers who rely on the company to generate solid returns to fund their retirement – Oxford is the real estate arm of the Ontario Municipal Employees Retirement System and owns and manages $17-billion of buildings – the stakes couldn’t be any higher.
This sliver of Manhattan is about to become a proving ground for some of the biggest players in Canadian real estate. Just across the street, Brookfield Office Properties, which is controlled by Toronto’s Brookfield Asset Management Inc., has its own project that will add millions more feet of office space.
That all of this is going ahead, despite the threat of another recession, illustrates the health of the Canadian property sector. Developers and landlords here came through the recession in far better shape than their American counterparts, due to tighter banking regulations and a healthier leasing market in Canada. They have the money, and are counting on better economic times in America’s largest city to make their bets pay out.
But projects of this size are still gambles. The last downturn saw Wall Street shed tens of thousands of jobs, and companies scrambled to unload office space. The threat of high vacancies has kept most domestic builders on the sidelines, and American banks aren’t keen to finance new projects. Indeed, Oxford came into the Manhattan project only after a number of big-name U.S. developers and financial players – including none other than Goldman Sachs – pulled out.
The last time the city saw such a transformation was more than 100 years ago, when Park Avenue and Grand Central Station were covered with the platform that is now crossed by millions of people a year without a second thought. If all goes according to plan, the hidden tracks below Hudson Yards will also be forgotten by the time the first residents move in.
“What we are doing here is building a new neighbourhood on the island of Manhattan,” said Blake Hutcheson, the chief executive officer of Oxford Properties. “You don’t do that every day.”
With marketing now under way and construction scheduled to start next year, the Canadian developer is set on a course that will transform it from an unknown foreign investor to one of New York’s most prominent landlords. It’s doing it with the help of Related Companies, a large and ambitious New York developer that is keen to use Canadian money to further its U.S. aspirations.
But before that can happen, an awful lot needs to go right. There are competing towers already under way at the World Trade Center site that can offer space at roughly the same price and be ready sooner. Brookfield’s new project calls for three new office towers – also on top of a railway trench.
Oxford scored an important victory in late October when it conscripted luxury goods maker Coach as a lead tenant, signing it up to occupy more than one-third of the first tower and ensuring work will proceed in the new year. Prices and terms were not disclosed.